* Bachus, Hensarling sent letter to SEC's Schapiro
* Letter notes political pressure in wake of 'flash crash'
NEW YORK Aug 31 Two U.S. congressmen have
urged the U.S. Securities and Exchange Commission to do a
thorough analysis and ignore political pressure before blaming
so-called high-frequency traders for the stock market's May
Republican Representatives Spencer Bachus and Jeb
Hensarling warned that "turning back the clock" and reversing
marketplace innovation "could do more harm than good," in an
Aug. 24 letter to SEC Chairman Mary Schapiro.
The SEC has yet to fully explain the unprecedented crash on
May 6, in which the Dow Jones industrial average tumbled some
700 points in minutes before rebounding sharply. Many observers
have partly blamed some of the computerized high-frequency
traders for exacerbating the plunge by not trading.
Bachus and Hensarling urged the SEC to understand the
importance of firms that provide the market with liquidity as
it considers new rules. They also posed 15 questions on several
recent SEC proposals for the marketplace, which has become far
faster and more complicated over the last decade.
"Changes in equity market structure did not occur overnight
and the SEC's response to these changes should be based on
economic and empirical market data, not political pressure,"
they said in the letter.
The pair are the latest in a handful of lawmakers to enter
the debate that began last summer and accelerated this year.
The SEC in January issued a comprehensive paper on
high-frequency trading and other market developments, seeking
(Reporting by Jonathan Spicer, editing by Leslie Gevirtz)